As a follow up to a recent article that I provided on various types of insurance, I was asked if I knew whether a homeowner’s insurance policy would provide coverage when the named insured was not the owner of the property – specifically, the property was actually owned by them as Trustee of their revocable living trust. It was a real situation.
The situation generally is this: A and B are a happily married couple. When they bought their dream home, they made sure that they had full and complete insurance coverage by a Homeowner’s Insurance policy. A few years later, on the advice of their accountant and estate planning attorney, they had a revocable living trust prepared, and they had a Deed recorded transferring the dream home to “A and B, Trustees of the A and B Family Trust”. Sadly, the next year a fire destroyed the dream home. A and B made a claim on their homeowner’s policy, and were told that their claim was going to be denied because the dream home was owned by the Trust, and since the policy only named them individually, there was no coverage.
(Now let me pause and say two important things: First, I am not specifically an insurance lawyer, and so can only speak of these things most generally, and secondly, I am pretty sure that once A and B hire a real insurance lawyer, this claim is going to get paid. However, as I will now go on to say, I think that there is a pretty easy solution to avoid this problem.)
That solution is pretty obvious: If you own property in your Trust, tell your insurance agent now! Since at least 2000, there has been as standard policy endorsement which adds the Trust (or you as Trustees, depending on how title is held) to your policy. In fact, tell the agent who is responsible for insuring any property you have in a Trust about this so they can be sure you are covered.
Brian Reider, Attorney,
Best, Best & Krieger